Electronics Firms Sony, Panasonic and NEC Announce Major Job Cuts and Plant Closures

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Researched by Industrial Info Resources (Sugar Land, Texas)--The downturn of the U.S. economy and other economies around the globe has affected virtually every major industrial sector. Beginning with the massive collapse on Wall Street and the subsequent major bailout of financial institutions and the automotive sector, the effects of the downturn have been trickling down from sector to sector for the past few months. Most recently, the electronics sector has taken its turn announcing major job cuts and plant closures as companies attempt to stem the flow of losses before they completely bleed out.

In recent weeks, electronic giants Sony Corporation (NYSE:SNE) (Tokyo, Japan), Panasonic Corporation (NYSE:PC) (Osaka, Japan) and NEC Corporation (TYO:6701) (Tokyo) have all announced that they would be forced to close plants and significantly reduce the number of employees as they attempt to control the losses that have affected them. In total, these three massive firms have announced that they will reduce their collective job force by more than 51,000 employees in the coming months, which includes salaried, hourly and temporary workers.

Sony, citing its first annual net loss in 14 years, will eliminate 8,000 of the company's 185,000 worldwide jobs and an additional 8,000 temporary workers, a number that is typically not included in global workforce numbers. In addition, Sony will also shutter five or six of its 57 plants across the globe. Some of the job cuts will come in the form of early-retirement packages offered to regular full-time employees. Sony is hoping to cut 30% of its personnel costs by March of 2010. Top executives at Sony will also give up annual bonuses, while other executives and managers will see pay cuts in the coming months.

NEC will lay off up to 18,500 workers within the next year as well. This includes 9,500 employees in Japan who will see their jobs eliminated, while an additional 9,000 jobs will be cut at the company's overseas operations. The majority of these job cuts will occur at NEC's chip, electronic-component and LCD divisions, indicating that NEC may well be exiting the LCD-manufacturing business altogether in the coming months. Officials have stated that NEC will close three "domestic production footholds" and five "business footholds" overseas as part of the cost-cutting program. Exactly which production facilities will be closed has not yet been announced. The job cuts and plant and business closures are expected to save the electronics giant more than $870 million during the next two years. In 2009, NEC expects profits to drop from about $163 million to a loss of $3 billion.

Panasonic recently announced that it would cut approximately 15,000 jobs and close a whopping 27 plants worldwide in the coming months. With demand for televisions, semiconductors and electronic products dropping rapidly, these dramatic cuts are necessary after Panasonic reported its first annual loss in six years. As sales of flat-panel televisions, DVD recorders, lamps, semiconductors and microwaves continue to slide, Panasonic is forced to make significant cuts in both personnel costs and operational costs. Thirteen plants in Japan and fourteen plants overseas will be shuttered by the end of March 2009 as the company struggles to adjust production numbers to match sales figures. Panasonic will also delay the start-up of two new plants in Japan--a plasma-television facility and an LCD-television facility--by at least six months because of significantly decreased demand.

Given the current economic climate not only in the U.S., but also worldwide, the only real surprise about these cuts is that it took this long for the electronics companies to make the decision to begin these significant cost-cutting measures. With the worldwide economy suffering, luxury items such as semiconductor-based products, televisions, DVD players and recorders, and cameras have seen sales drop on an almost daily basis, so it was only a matter of time before major job cuts and plant closures were expected to follow. These companies are large enough to survive the current economic downswing, but it will probably be well into 2010 before we see companies such as these begin to consider reopening plants and rehiring former workers.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.